By George Kennedy, Solicitor, Corporate & Commercial Department
The first part of the draft Companies Bill (referred to as pillar A) was published in 2011. It is envisaged that the second part (pillar B) will be published in late 2012 or early 2013 and that the bill will be signed into law in 2013 or 2014. The intention of the draft Bill is to consolidate and modernise Irish company law which, to date, has been updated on a piecemeal basis since the enactment of the foundation Companies Act in 1963.
One of the key modernising features of the Bill is the conversion of existing private limited companies to companies limited by shares (CLS) – which is contained in pillar A of the Bill. Some of the key distinguishing features between CLS and existing private limited companies will be that CLS will not be required to have an objects clause, the memorandum and articles of association will be replaced by one document and the CLS will be permitted to have just one director and a separate company secretary. On a designated transition date all existing private limited companies will convert to CLS unless steps are taken prior to that date by companies to designate themselves otherwise. One such alternative form will be for existing private limited companies to elect to become designated activity companies (DAC), details of which will be published in pillar B of the Bill.
Other key innovations in the draft Bill include a consolidation of offences for breaches of company law into categories, with corresponding penalties applicable to each category. Also directors’ common law fiduciary duties, which are currently a source of uncertainty for company directors, will be codified together with consolidated directors’ statutory duties.
It is hoped that this consolidated Companies Bill will simplify and modernise Irish company law. It is likely that the Bill will not be enacted until 2013 or 2014, however once the Bill is signed into law steps will need to be taken by existing private limited companies in relation to their preferred corporate status and also to ensure compliance with the new regime.